Freeport LNG is delaying the expected restart of its operations and LNG exports by approximately a month after the fire and explosion that closed the facility in June 2022. The company further plans to scale up operations in the following five months back to full capacity while demand for LNG remains at record levels. U.S. natural gas futures fell more than five percent on news of the further delay according to Reuters.
At the beginning of August, Freeport LNG had said it was on track to restart operations by early October at what is the second largest LNG facility in the United States. The company reported it entered into an agreement with regulators on the steps required before the plant resumes operations after the incident at the beginning of June. Reuters reports that U.S. regulators believe the explosion and small fire were due to an overpressurized pipeline that bust sending the fireball into the sky.
Freeport is now reporting that it “has identified a recovery plan for reinstatement of partial operations that it believes ensures the long-term safety and integrity of the facility, provides recovery execution certainty and minimizes procurement and performance testing risks.” They engaged Kiewit Energy Group, which has significant LNG facility experience, to perform the engineering, procurement, and reconstruction activities necessary to implement Freeport LNG's recovery effort.
They now anticipate that initial production can commence in early to mid-November, and ramp up to a sustained level of at least 2 BCF per day by the end of November. That would represent over 85 percent of the export capacity of the three train, 15 MTPA liquefaction facility. The recovery plan will utilize Freeport LNG's second LNG loading dock as a lay berth until loading capabilities at the second dock are reinstated in March 2023, at which time the company anticipates being capable of operating at 100 percent of capacity.
The delay in restarting the operation comes as a blow to the U.S. industry which in the first six months of 2022 claimed the title of the largest LNG exporting nation, although Qatar also contends that it retook the leadership after a period of maintenance in its fields.
The U.S. government has forecast that U.S. production could reach a record 85 MTPA of LNG this year up from 67 MTPA in 2021. Freeport being offline for at least five months is likely to impact this year’s total but the U.S. industry is growing rapidly with analysts forecasting that the U.S. along with Canada and Mexico will increase production a total of 60 percent over the next few years. Reuters calculates that eight North American LNG export terminals are under construction and over a dozen more could receive financial greenlights by 2023. The U.S. projects are due to begin shipping over the next three to four years.
